Start-ups struggle to pay back state loans Jonathan Isaby for The Sunday Times

May 12, 2015 10:01 AM

Yet another story of using arbitrary targets for spending rather than looking at the results that spending produces, this time by the Sunday Times. This time it's revealed that around £50 million provided through the Start Up Loans scheme is unlikely to be repaid. A major design flaw of the scheme is that it provides loans through delivery partners who in turn receive a 'finders fee' for every loan they grant.

Our Chief Executive Jonathan Isaby said:

"Too often, the success of these schemes is judged by inputs - how much money is shuffled out the door, and how quickly - rather than outputs. As a result performance tends to be patchy at best, and we've seen that again here with this stunningly high, and costly, default rate.

"The wider question is why taxpayers are funding loans in the first place, for start-ups or otherwise. That's what commercial banks are for, and now taxpayers are on the hook for loans that were evidently deemed to be ill-advised by those same banks. That's not a sensible way to spend - and risk - taxpayers' money, and any extension of the scheme would only increase the potential downsides.

"There are answers to be found on how to increase lending from commercial banks, but the Government stepping in with a taxpayer-funded alternative is not one of them."

You can read the article in full here (£)

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